DAL - Wall Street Lunch: Energy Impact From Attack Widens

2023-10-09 11:53:00 ET

Summary

• Chevron shuts down natural gas production at Tamar platform after attack on Israel by Hamas.
• J.P. Morgan starts coverage on Arm with "overweight"; Wedbush lowers PT on Rivian.
• TD Ameritrade Investor Movement Index fell slightly to 5.64 in September.

Listen below or on the go on Apple Podcasts and Spotify

Israel orders a ‘complete siege’ of Gaza. (0:15) Wedbush cautious on Rivian (RIVN) on management concerns (2:12) Pintesrest (PINS) gets a vote of confidence . (2:32)

This is an abridged transcript of the podcast.

Our top story so far

Chevron ( CVX ) says it was instructed by the Israel government to shut natural gas production at the Tamar platform in the Mediterranean Sea. The move comes following the weekend attack on Israel by Hamas.

The company says it continues to supply Israel and the region from its Leviathan production platform. The Tamar field produces 7.1-8.5 million cm/day of natural gas.

Israel has ordered a "complete siege" of Gaza. The defense minister says there will be no electricity, food, or fuel delivered to the region. It has also mobilized 300,000 reservists as it retaliates for the surprise offensive.

In today’s trading

The risk-off moving following the conflict continues. Stocks are down, with the S&P 500 (SP500), Nasdaq (COMP.IND), and Dow ( INDU ) off more than half a percent.

James Demmert, CIO at Main Street Research, says they "expect short-term volatility in the stock market and oil market as investors digest the heightened tensions."

He notes that stocks are "extremely oversold amid a surge in bond yields, and any positive news on inflation from Thursday's CPI could spark a rally in bond prices and a decline in bond yields largely because bond yields overshot to the upside in recent weeks and bond yields are due for a correction."

The "current high level of the 10-year Treasury yield (US10Y) is unsustainable given that the Federal Reserve is close to or finished with their rate hike campaign and the recent bond yield surge has actually accomplished most of the work for the Fed," he adds.

BofA strategist Michael Hartnett said last week investors are facing the biggest bond bear market in history.

The U.S. bond market is closed for Columbus Day, but Treasury yields moved lower in London trading.

Among active stocks

J.P. Morgan started coverage on Arm Holdings ( ARM ) with an overweight rating.

Analyst Harlan Sur, who also put a $70 price target on Arm, said the company has near 100% market share in smartphones, with Apple ( AAPL ) and Android ( GOOG ) ( GOOGL ) devices using Arm architecture. But the company is focusing on getting more intellectual property into total compute platforms, including integrated CPUs, GPUs, networking, and memory.

Wedbush Securities lowered its price target on Rivian Automotive ( RIVN ) to $25 on the heels of a $1.5 billion convertible note offering. Analyst Dan Ives and his team said they fully get the capital needs down the road as it ramps production and deliveries. But they also see the Street's low confidence in the management team around investor messaging and execution as a major problem.

Wells Fargo added Pinterest ( PINS ) to its Signature Picks portfolio. Analyst Ken Gawrelski said Pinterest's "revenue acceleration outlook" and strong margins, driven by improvements in its advertising products and third-party partnerships, are likely to help boost the company's financial position.

In other news of note

International flights to Israel have been drastically reduced after the attacks over the weekend by Hamas led to a declaration of war in the region.

The U.S. Federal Aviation Administration, the European Union Aviation Safety Agency, and Israel's aviation authority all urged airlines to use caution but did not officially suspend flights.

U.S. air carriers United Airlines (UAL), Delta Air Lines (DAL), and American Airlines ( AAL ) suspended direct flights. In Europe, Air France-KLM ( AFRAF ) and Finnair ( FNNNF ) suspended direct flights, while easyJet ( EJTTF ) halted flights to Tel Aviv for a few days. Wizz Air (WZZAF), which has the highest exposure to Israel on a revenue percentage basis, cancelled flights to and from Tel Aviv until further notice.

And finally, in the Wall Street Research corner

The TD Ameritrade Investor Movement Index fell slightly to 5.64 in September from 5.70 in August, the first monthly decrease in five months. The reading for the five-week period ended Sept. 29, 2023, ranks “moderate low” compared with historic averages.

The IMX is TD Ameritrade’s behavior-based index, aggregating Main Street investor positions and activity to gauge what investors are doing and how they are positioned in the markets.

Joe Mazzola, director of trading and education at Charles Schwab, says, “September can be a brutal month for the markets, and although in some ways this one was no different, our clients still found opportunities to balance their overall exposure by rotating their sector-weighted holdings.”

Clients were net buyers for the month, with the strongest buying interest in Industrial, Consumer Staples and Healthcare sectors. See the stocks that saw the biggest buying and selling in the full story. I’ll put the link at the top of Show Notes.

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